Wonga is set to ditch its cuddly puppets as its new chairman plans to overhaul its image and business operations.

Meanwhile the UK's second biggest payday lender, The Money Shop, has agreed to refund thousands over a systems blunder, which meant customers may have been lent more than they could afford to pay back.

Mr Haste added that he wants Wonga to become more ‘customer focused’ and change its business operations, even if that means it makes less money in the near term.

Goodbye: Wonga is set to retire its cuddly puppets, its incoming chairman told the BBC

Meanwhile The Money Shop today agreed to refund over £700,000 of interest and default charges to 6,247 customers who received a loan that exceeded its own lending criteria.

Payday lender Dollar, which trades as The Money Shop, agreed to refund the charges following a review by the Financial Conduct Authority (FCA). It found the lender failed to ensure that proper checks took place to ensure that borrowers did not take on more than they could afford to pay back.

Dollar will contact all affected customers and expects to provide refunds totalling £79,000, with the remainder of borrowers having their outstanding balance reduced. The company has blamed a systems error for the mistakes, which cover a period between January 2013 and April this year.

The announcements from the UK’s two biggest lenders come ahead of an anticipated announcement this week from the financial regulator about a cap on payday lending.

The Financial Conduct Authority is set to unveil a cap on how much operators can charge for payday loans, a move that could transform the payday industry.

The cap was announced by the chancellor George Osborne in November and is due to be introduced next year.

Many expect the cap to be stipulate a maximum overall charge for taking out a loan – including any fees or charges – rather than simply a cap on interest rates.

The cap is just one of many new restrictions imposed on lenders as part of a clampdown on lending practises.

As of July 1, lenders must put ‘risk warnings’ on television adverts. They are also banned from rolling over loans more than twice and must check potential customers can afford to take out debt before giving them loans.

Figures from the payday loan industry body The Consumer Finance Association, suggest the new rules are already having a dramatic impact on lending, and the new rules could continue to transform the sector.

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The association said its members, which make up nine of the UK’s biggest payday lenders, have lent 50 per cent less in the past three months than in the same period last year.

It expects the sector to shrink by about half in the coming years.

The new rules from the Financial Conduct Authority come as the £2.8billion sector continues to face intense scrutiny amid outrage over the way some customers have been treated.

Andy Haste's appointment comes weeks after Wonga said it had agreed with regulators that it would pay £2.6 million in compensation after chasing struggling customers with fake legal letters to pressurise them into paying up.

Mr Haste said the company, which has been strongly criticised by MPs over interest rates of more than 5,000 per cent, must review rates, fees and charges and no longer be seen as targeting 'the young and the vulnerable'.

He said: 'This is a sector and Wonga is a company that needs to go through significant change if it is to have a sustainable future.

'Some serious mistakes have been made. The company admitted those mistakes and it has apologised for those mistakes.

'Wonga has understandably faced a lot of criticism and I know that we need to repair our reputation and regain our right to be an accepted part of the financial services sector.'

The new chairman pointed to the rapid growth of the company, which has more than a million customers after being founded seven years ago to explain how 'some of our systems, our processes, our controls, haven't kept pace'.

Mr Haste said a review of its customer base and products would ensure it was 'only lending to people who can reasonably afford our loans'.

Wonga said it would also ensure all lending was carried out in a 'responsible and transparent manner', which would result in a tightening of its lending criteria.

Pay back: More than 6,000 customers of The Money Shop will receive a refund, it said today

The new chairman said he would bring in a culture of placing 'fair treatment of customers at the heart of everything we do'.

Mr Haste said he was 'very aware' of criticism of its current advertising and marketing campaign and said: 'The puppets will be going.'

He said: 'I am going to be reviewing all of our advertising and marketing to make sure that we don't leave any impression that we are trying to influence or target the very young or the vulnerable.'

Mr Haste added: 'Our goal is to deliver the original vision for Wonga - to provide short-term lending to the right customer in a responsible and transparent way.

'We will become a more customer-focused, and inevitably in the near term, a smaller and less profitable business.

'However, we are determined to make the necessary changes and serve our customers in the right way, to repair our reputation and become a business with a long-term future and an accepted place in the financial services industry.'

Mr Haste was chief executive at RSA from 2003 to 2011 and previously held the same position at AXA Sun Life. He is also senior independent director at ITV and senior independent deputy chairman of Lloyd's of London.

The Money Shop’s parent company Dollar has also today committed to improving its approach to assessing affordability.

It will appoint an independent ‘skilled person’ to review its lending decisions and will consider whether customers are being treated fairly and being lent sums they can afford to repay.

They will report their findings back to the FCA.

Customers eligible for a refund will be contacted directly by The Money Shop.

'Despite the payday lending industry’s repeated assurances that it was lending responsibly and that poor practice was a thing of the past, we have continued to see thousands of cases where people have been trapped in unsustainable and unaffordable cycles of high-cost borrowing, as loans are rolled over and borrowers take on multiple debts,' he said.

'Today’s announcement is further evidence that payday loan companies have failed to act in the best interests of borrowers.'